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Buy An Affordable House

Our experience with tens of thousands of homebuyers has led us to define an affordable home using two rules of thumb:

Save up at least 20 percent of the purchase price for the down payment. This way you will avoid paying for expensive PMI insurance which does not benefit you at all.

Your total housing expenses should be 30- 40 percent of your gross income, and should never exceed 40 percent.

That 30-40 percent includes all housing expenses: mortgage payment, real estate taxes, utilities, insurance, and maintenance (estimate maintenance each year to be 1–2 percent of the value of the home). If these combined expenses exceed 40 percent of your income, you will need to reduce spending in other categories.

Finding an affordable home is particularly challenging in areas where the cost of housing is extremely expensive. If you are in this situation, there are only three things you can do: save, pray and wait. Save for the down payment; ask the Lord to provide you with an opportunity to buy an affordable home; wait and continue to rent until He does.

Many honest lenders will tell you exactly what you can and cannot afford to borrow. Others care more about their compensation. Since many work on a commission their motivation is to close the deal. They might qualify you for a loan that is too expensive. So, be careful not exceed the guideline of 30-40 percent of income for all housing expenses.